INDIVIDUAL TAXPAYERS

Natividad, Precious Anne G.

2BSA-3 | MW 8:00-10:00AM Classification

Individual Taxpayers
natural persons with income derieved from within the territorial jurisdiction of a taxing authority.
HOW DO WE CLASSIFY
INDIVIDUAL TAXPAYERS?
1. establishes to the satisfaction of the
commissioner of internal revenue the
fact of his physical presence abroad
CITIZENS with a definite intention to reside
therein.
-resident citizens
-non resident ex. immigrant in other countries.
physically not in the PH because they
are now a resident there, they are non
resident here.
ALIENS (FOREIGNERS)
2. citizen who leaves the PH during the
-resident alien taxable year to reside abroad, either as
-non resident alien an immigrant or for employment on a
permanent basis.
engage in trade
ex. calendar year (taxable year)
-non resident alien not immigrant or an employee permanently.
engage in trade 3. a citizen of the PH who works and
derives income from abroad and whose
employment thereat requires him to be
physically abroad most of the time.
WHO during the year.
ex. OFW/OCW. at least 183 days out of
ARE the country even of not continually, but
repeatedly.
NON People who likes to travel all the time are
not included.
RESIDENT
CITIZENS?
CITIZENS CLASSIFIED BOTH AS RESIDENT AND NON
RESIDENT IN ONE TAXABLE YEAR

A filipino citizen can be both classified as non/resident

in one taxable year.
If that filipino arrives in the PH permanently, all of his income
here shall be taxable now starting from the date when he
came here.

an individual whose residence is within the PH and who is not a citizen

WHO ARE thereof. SEC 22(F)
RESIDENT aliens who are actually present in PH and who are not mere transients.
an alien who lives in the PH with no definite intention as to his stay is also a
ALIEN resident alien.
alien who comes to the PH for the purpose that requires extended stay for its
TAXPAYER accommplishment, so he makes his home temporarily in the PH.
 INDIVIDUAL TAXPAYERS
Natividad, Precious Anne G.
2BSA-3 | MW 8:00-10:00AM Classification

WHO ARE NON RESIDENT ALIEN

TAXPAYER?

means an individual is not a

resident here.
comes to the PH for a definite
purpose, and its nature may be
promptly accomplish.
aliens who are mere transients or
non resident

NON RESIDENT ALIEN

TAXPAYER ENGAGE IN TRADE
AND OR BUSINESS
aliens who have business income
in PH.
aliens who stayed for an aggregate
period (most of the time. can be not
consecutive) of more than 180 days
during taxable year.
 SELF-EMPLOYED
& PROFESSIONALS

SELF-EMPLOYED
RA10963 TRAIN Law
- "a sole proprietor who reports income earned from
self employment. S/he controls who he/she works for,
how the work is done and when it is done. It includes
professionals whose income is derived purely from the
practice of profession and not under an employer-
employee relationship."

PROFESSIONAL
a person formally certified by a professional body belonging to a
specific profession by virtue of haing completed a required course of
studies and/ or practice whose competence can usually be
measured against an establishment set of standards.

PURELY SELF-EMPLOYED
GROSS S/R P3M AND BELOW GROSS S/R MORE THAN P3M
Graduated rate Graduated rate
OR
8% Tax on gross sales/receipts
and other non-operating income
in excess of P250,000 in LIEU of
GR and Sec. 116

MIXED INCOME EARNER

INCOME FROM SELF-EMPLOYMENT COMPENSATION INCOME
GROSS S/R P3M AND BELOW Graduated rate
Graduated rate
OR INCOME FROM SELF-EMPLOYMENT
8% Tax on gross sales/receipts GROSS S/R MORE THAN P3M
and other non-operating income Graduated rate
in excess of P250,000 in LIEU of
GR and Sec. 116
 SELF-EMPLOYED
& PROFESSIONALS

Requirements to Avail the 8% Preferential Tax

1. SEP should be:
-non-vat registered and AGS/R Less than or equal to P3M
-not engage in vat exempt-sales/transaction(s)
-not subject to other OPT other than Sec. 116 of the tax code.

Signify Intention to be taxed at 8%

-RR 8-2018 provides, unless the taxpayer signifies in the 1st
quarter return of the taxable year the intention to elect the
8% income tax, the taxpayer shall be considered under
section 24(A) of the Tax Code, as amended, and such
election shall be irrevocable.

Tax Payer shall be allowed an income tax credit of

quarterly payments initially made under the 8%
income tax option.
Taxpayer is likewise liable for business tax(es), in
addition to income tax. For this purpose, the
taxpayer is required to update his registration
from non-vat to vat taxpayer.
percentage tax under Sec. 116 shall be imposed
from the beginning of the year until tax payer is
liable to vat.
Vat shall be imposed prospectively.
Partners of GPPs are not allowed to avail of the 8%
income tax rate option since their distributive
share from GPP is already net of costs and
expenses.
 Interest Income
SUBJECT TO FINAL WITHHOLDING TAX

TYPES OF INCOME &

APPLICABLE TAX
1. Ordinary Income- Basic Tax; Sec. 24 (A) PASSIVE INCOME
2. Passive Income- Final Withholding Tax;
Sec. 24(B); 25 (A)(B) there's no need for an active
3. Capital Gains- Capital Gains Tax; Sec. 24(C)(D) participation to derive that
income/ to earn.
FINAL WITHHOLDING TAX (FWT) ON
PASSIVE INCOMES DERIVED FROM
PHILIPPINE SOURCES [(SEC.24)B)]
1. Interest Income
2. Dividend Income
3. Royalty Income
4. Prizes
Interest Income
1. Bank Deposit
5. Other Winnings 2. Deposit Substitute
--If TP is NRA NET GR:25% Sec.25 (B) -alternative form of obtaining funds from
the public, other than deposits
Straight rate if it is NRA Net 3. Tust Fund
4. Mutual Fund
INTEREST INCOME (PHILS) 5. Other similar arrangements
--Rate Php.20%, unless exempt LT bank
-Interest income from any currency bank deposit/investment
deposit exemption is NOT applicable to NRA
-Yield or any other monetary benefit from NET.
deposit substitues --Foreign Currency Deposit System
-Yield or any other monetary benefit from $15%
trust funds and similar arrangements (under the TRAIN Law) for residents
-interest incomes received from a only (RCs and RAs)
depository bank under expanded FCDS. Non residents- Exempt (NO INCOME
TAX)

LONG TERM RR 14-2012; RMC 7-2015: Long-term deposit or

investment certificate refers to certicicate of time deposit
DEPOSIT OR or investment in the form of savings.
-atleast five years maturity and issued by a bank to be
INVESTMENT exempted.
 Interest Income
SUBJECT TO FINAL WITHHOLDING TAX

Requirements for Exemptions

-Individual Citizen, a resident alien or a nonresident

alien engage in trade or business in PH.
-Long term deposits or investment certificates
should be under the name of the individual and not PRE-TERMINATION
under the name of the corporation. OF LT DEPOSIT/
must be in the form of savings, common or INVESTMENT
individual trust funds, deposit subs, investment.
As long as you reach the 5
-must be issued by banks only and not by other
year agreement before the
Financial institutions.
pre-termination of LT
-must have maturity period not less than 5 years.
deposit or investment, you
-must be in denomintions of Ten Thousand pesos
will not be subject to any
(P10,000) and other denominations as may be
graduated rates of final
prescribed by the BSP.
withholding tax.
-should not be terminated by the original investor
before the fifth (5th year), otherwise they shall be
subjected to final tax rates of 5%, 12%, or 20% on
interest income earnings.
-other than those exempted by the law or
regulations, other income such as gains from
tading, foreign exchange gain shall not be covered
by income tax exemption.
 Capital Gains Tax
ON INDIVIDUAL TAXPAYERS

ORIGINAL SALE OF CAPITAL

ASSET
1.Stock in trade of the taxpayer or
other property of a kkind which be
included in the inventory
2.Property used in trade or business
subject to depreciation
3.Real property held by the taxpayer
primarily for sale to customers in the
ordinary course of trade or business
4.Real poperty used in the trade or
business of the taxpayers
ASSET SUBJECT TO CGT
Section 24(C)- A final tax of 15% is hereby
imposed upon the net capital gains realized
during the taxable year from the sale of shares
of stocks in a domestic corporation.
Section 24(D)- A final tax of six percent (6%)
base on the gross selling price or current fair
market value as determined in accordance
with section 6(E) of this code, whichever is
higher, is hereby imposed upon capital gains
presumed to have been realized from the sale,
exchange, or other disposition of real property
located in the PH classified as capital asset.

CAPITAL
ASSET
includes all other property held by
the taxpayer (whether or not
connected with his trade or
business) not included in the
definition of ordinary assets above.
PRINCIPAL
RESIDENCE
RR 14-2000/ RR 13-99:
the family home of the individual taxpayer.
it refers to the dwelling house, including the
land on which it is situated.

REQUIREMENTS FOR EXEMPTION

1. proceeds is fully utilized; within 18 calendar months from the date of disposition.
If there's no full utilization of the proceeds of sales of disposition:
Unutilized Portion
GSP/ FMV at the time of sale,
Taxable Amount = X
whichever is higher
Gross SP

2. Historical cost or adjsuted basis of the real property sold or disposed shall be carried
over to the new principal residence built or acquired.
3.BIR shall have been duly notified by the tax payer within 30 days from the date of sale or
disposition
4. the tax exemption can only be availed of once every 10 years
5. it is likewise required under RR 2:98 that the amount representing the 6% CGT must be
deposited under an Escrow Agreement.